Should you "ROBS" your 401(k) to start a new business?

ROBS is an acronym for a relatively new financing arrangement known as a "rollover as business startup" being touted on the Internet and arranged by some investment firms.

Typically a ROBS works like this: You pay a fee to a plan sponsor to create a corporation, which sets up a profit sharing or 401(k) plan of its own. Then you roll funds from your own 401(k) plan into the newly created corporation's plan. Your next step is to use the funds in the corporation's plan to buy the stock of your new company, thereby providing working capital for your new business.

Sound too good to be true? It probably is. For one thing, profit sharing plans, while a legitimate way to reward employees by sharing profits from your business, must follow strict rules. These include filing annual tax returns and avoiding transactions that discriminate in favor of highly paid employees, including yourself. The IRS scrutinizes ROBS very closely to be sure all the rules are carefully followed.

When you're looking for capital to set up a new venture, the idea of tax-free cash is appealing. But if the IRS determines that the deal is a prohibited transaction, you can be hit with penalties and you risk losing your retirement money.

Please contact us before you enter into any complicated, questionable arrangement. We're here to help you make the right choices for your business.

My Point of View on How Outsourcing is Affecting Social Security

My Point of View on How Outsourcing is Affecting Social Security.

Our Entitlement pyramid is crumbling and outsourcing is one of the culprits.

We are creating an inverse pyramid by having less employees contributing to
support the present time retirees.

The outsourcing business has a detrimental impact on U.S.
Employment, the U.S. Economy and the U.S. Treasury, because the
money is expended abroad and normally it does not come back.

The outsourcing business is growing day by day in America.

Employment (payroll) is the basis used in theory to calculate future
benefits.

When you outsource a job:

U.S. may have a unemployed american.
U.S. will not received Social Security taxes from this unemployed American.
U.S. will not receive Medicare Taxes from this unemployed american.
U.S. will not benefit from consumer spending from this unemployed american.
U.S. will have to cover the uninsured through medicaid because this
unemployed american.
U.S. will lose all the direct and indirect benefit of having that unemployed
american working.
U.S. is exporting its working capital.


U.S. must maintain quality in education so our jobs are not exported to help
other countries. We need the help ourselves.

Our social security program is in trouble Our Medicare program is in trouble
Our health insurance industry does no contain cost.
Our future retirees are in trouble.

Jose F Padro
2009

Any tax advice included in this written or electronic communication was not
intended or written to be used and it cannot be used by the taxpayer, for
the purpose of avoiding any penalties that may be imposed on the taxpayer by
any governmental taxing authority or agency.